Expansion of a small Swedish IT firm: A market and entry mode selection

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Expansion of a small Swedish IT firm;

-‐ A market and entry mode selection

Master Thesis, International business 2012-‐02-‐16

Authors:

Erik Erlandsson Habane Hassan

Supervisor:

Martin Johanson

Uppsala University Department of Business Studies

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ABSTRACT

Internationalization within the information communication technology (ICT) sector has become more essential today and this has raised the international competition over customers. The Nordic markets growth and development in its ICT sector has brought new competition and has been the substance of change in business concerning, organizational changes, reduce transaction costs and rationalize and restrict supply chains.

The purpose of this thesis is therefore to compare the Nordic ICT markets and the potential for small IT firm namely, Radar Group International AB. To be able to understand Radar Group’s potential in the Nordic IT markets this thesis is divided in to two aspects, market selection and entry mode selection. When we have evaluated the Nordic markets we made, based on our findings recommendations to Radar Group in what market to enter and how to enter that market. For comprehensive understanding of this study, we choose concentration of the theoretical framework committed to the subject, market selection and entry mode selection. Furthermore, we used qualitative method in collecting the empirical data consisting of raw data and in-‐depth interviews with three international IT firms based in Sweden about their market selection and entry mode selection.

Our conclusion indicates that Radar Group should explore the Norwegian market as it offers greater customer potentials and stronger economic growth. While expanding to the Norwegian market, it is our opinion that Radar Group should use Joint venture as their entry mode. It is the most suitable mode for Radar Group in terms of financial aspect, the company’s business concept and previous experience.

Key words:

Internationalization, Entry mode, Economic growth, Customers, IT company, ICT market, Nordic markets.

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Table of contents

1 INTRODUCTION ... 4

2 THEORY ... 7

2.1 Market selection ... 7

2.1.1 Market size ... 8

2.1.2. Economic growth ... 8

2.1.3 Competitivness ... 8

2.1.4 Potential customers ... 9

2.2 Entry mode selection ... 9

2.2.1 Greenfield investments ... 9

2.2.2 Acquisition ... 10

2.2.3 Franchising ... 10

2.2.4 Joint venture ... 11

3 METHODOLOGY ... 12

3.1 Research method ... 12

3.2 Respondents and the chosen organization ... 13

3.3 Oprationalization ... 15

3.4 Data collection ... 16

3.4.1 The interviews ... 17

3.4.2 Reliablity and Validity ... 17

3.5 Limitations ... 19

4 EMPIRICAL FINDINGS ... 20

4.1 Nordic IT market in Brief ... 20

4.2.1 Esri Sweden ... 23

4.2.2 4C Strategies AB ... 23

4.2.3 Easit AB ... 24

4.3.1 Esri Sweden ... 24

4.3.2 4C Strategies AB ... 26

4.3.3 Easit AB ... 27

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5 ANALYSIS ... 29

5.3 Conclusion ... 33

5.4 Further research proposals ... 34

REFRENCES ... 35

Interwievs: ... 35

Internet sources: ... 35

Industry reports: ... 35

Books: ... 35

Articles: ... 36

Appendix 1 -‐ The products and services offered by Radar Group ... 39

Appendix 2 – Empirical research questions ... 41

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1 INTRODUCTION

Companies, in all businesses, compete with each other in regards of customers and they all have their own strengths and knowledge to offer to the potential customers. The businesses of consulting are no exception. Consulting service companies support organizations to help them rethink their business through strategy, business processes, employees and technology. By consulting they offer (a), professional solutions, experience and efficiency for problems that the customers face, (b) they show and introduce customers to new products and concepts, (c), transfer knowledge to stay competitive and stay focused on the core competence. In order for consultants to support their customers and create growth, they need insights and knowledge in new technology, trends, and the ability to address a problem and build technical and creative solutions to deliver results. They assist clients with planning and observations of technology, computer software and hardware evaluation and selection and software development in order to give the client’s competitive edge and long-‐term survival in their business field. This is achieved by having a broad spectrum of knowledge in consulting and informational technology across industries. (Basil, Yen and Tang, 1997)

Within the field of consulting there are many different business areas, one being Information communication technology (ICT). The OECD definition of ICT industry, includes (1) sales (wholesale and retail related to new ICT products), (2) software development and consultancy, (3) hardware (manufacturing) and (4) telecommunications (Nordic ICT spaces, 2004).

When a company feels that they have to search for new potential customers, one option is to move abroad and develop their international potential. Throughout the history of international business research, researchers are not all on the same page regarding internationalization. For instance it has been argued that companies should develop the knowledge and market experience in foreign affairs by a step-‐by-‐step model referred to as the Uppsala model (Jan Johansson and Jan-‐Erik Vahlne, 2009). While some researchers, on the other hand, argues that some companies are born global and

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internationalize almost as soon as they established some kind of business (Freeman, Susan, Edwards, Ron and Schroder, Bill, 2006). Internationalization of a company does not necessarily mean that the company moves part of their business to a different continent or to a whole new part of the world, internationalization might as well be moving across the border to the neighboring country of the company’s home market, as the case with many companies. The ICT market is an example of a market where the company does not have to look far for a new market to explore since almost every country as of today have a somewhat developed ICT market. In modern times the ICT is transforming activity through the whole economy, just as the electricity, railways and steam engine did in the past. ICT has an important economic impact as it has contributed significantly to growth in several OECD countries. Additionally it has brought new competition and has been the substance of change in business, when it comes to restructuring of firms, a change in work organization, reduce routine transactions and rationalize and restrict supply chains. Manufacturing has become more efficient, inventories and costs in the supply chains have dropped, design and production have become integrated, and ICT applications have been part of innovation in services (OECD, Science and technology, 2001).

The Nordic markets, however, are the leading regions when it comes to ICT use in the businesses, in the government sector and among the general public. The region has improved performance in this area over the latest five-‐year period, indicating that this has been a prioritized policy area for local institutions and governments. (Nordic Innovation Monitor, 2009) The ability to use technology in developing new products can provide regions with a competitive advantage, as ICT is used on a larger scale in providing people with new solutions. The Nordic region is unique in its way to utilize the opportunities for innovation offered by ICT. With high competence level among citizens in term of the use of ICT have formed a strong position in the area of ICT in the Nordic markets. The citizen use internet to attract with public authorities, internet banking and e-‐commerce, which have lead the performance in the regions. The performance in Corporate Digitalization is also strong, with high levels on enterprises using e-‐learning applications. However, other regions across the world are catching up in the areas of

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ICT, for instance the US, the UK and Canada are already performing well in the area of Corporate Digitalization. (Nordic Innovation Monitor, 2009)

On ICT the Nordic Region outperforms the other OECD regions and are among the top 5.

Indicators further show that Nordic citizens are among the world’s most active users of the Internet. Particularly when it comes to the competence level on ICT among employees, the Nordic region outperforms the English-‐speaking countries. Moreover, the public segment in the Nordic region is very advanced when it comes to digitalization of services compared US, the UK and Canada, even though the US is also in top 5. (Nordic Innovation Monitor, 2009)

With all this information in mind, it is safe to say that the Nordic markets are a good first step to internationalize as ICT businesses and looking for new markets. One ICT company looking to internationalize is Radar group international AB (Radar Group). The company is a Swedish IT consultancy firm that feels that they have to internationalize in the near future in order to keep up with the competition, find new customers and also meet the demands of their already existing customers. Radar Group is on the verge of internationalizing and need help to make a market evaluation and recommendations on which market to enter and which entry mode strategy to use. As one can argue that choosing a market to enter and how to internationalizing is a problematic thing. There are many different factors to have in mind when evaluating and choosing a market. The companies also have to choose which entry mode that is best suited for the market and the company itself. Needless to say, there are a lot of factors to calculate on.

The purpose of this study is to compare the Nordic ICT markets and the potentials for Radar Group’s services. When we have evaluated the Nordic markets we will, based on our findings, make recommendations to Radar Group as to which market to enter and what entry mode strategy Radar Group should use for a successful market entry.

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2 THEORY

2.1 Market selection

For a firm that is pursuing to internationalize, the initial step is to consider which market or markets to entry. Subsequently the firm needs to appoint the issues that are directly related to the possibilities that could affect their entry such as regulatory regimes, strength of the competitors and cultural distance. This is necessary since the entry choice could determine the success or failure in early internationalization.

Moreover, the location of the selected markets could affect the co-‐ordination of the activities as well as the firm having local branches effects the firm’s global positioning strategy. Firms also need to distinguish between countries and markets because the market differences may be unrelated to political boundaries. For instance the Scandinavian countries are often treated as a relatively homogeneous market. (O’Farrell and Wood, 1994)

There are many ways in selecting a market for internationalization and sometimes a market selection happens by chance, where the firms follows their domestic clients establishing offshore operations in a foreign market which is a phenomenon characterized in the service sector. Similar to this, sometimes firms seem to follow competitor into new country markets. (Brewer, 2001)

Market similarity is one factor in selecting market, as companies prefers markets that are similar in culture, language and knowledge (O’Farrell and Wood, 1994). Different operation such as marketing operations, cost of market entry, cost in delivering product to customer can be reduced by standardized set in similar markets and firms can employ their strategies as they do in home market (Davidson, 1983). In order to evaluate the markets and be able to distinguish them from each other, it is of importance to base the evaluation on factors that gives the company information about the markets regarding key questions (O’Farrell and Wood, 1994).

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2.1.1 Market size

The market size of the host market is positively related to internationalization of firms since they are likely to invest in a larger sized market for greater return (O’Farrell and Peter A, Wood, 1994). Other empirical findings show that the market sizes have effects on the financial flow and asset returns (Philippe Martin and Helene Rey, 2004). But if a firm is engaging in a foreign market through export, the market size is of less importance unlike to the foreign producers that invests and makes significant resource commitment to the foreign market (Erramilli, 1992).

2.1.2. Economic growth

Besides the markets size some researchers consider the economic growth as a useful measurement in selecting the market with greater potential. There are usually two ways to measure economic growth. First, market growth in terms of turnover and besides that, one commonly used measurement is the gross nation product (GNP) growth rate and imports (Kumar, Stam and Joachimsthaler, 1994).

International firms prefer markets that offer the opportunity in gaining greater returns in terms of gross domestic product (GDP). Markets with large GDP have a great impact in attracting foreign direct investors. High level of GDP increases the market attractiveness and decreases effects in country risks, cultural distance and nation values.

(Ojala andTyrväinen, 2007)

2.1.3 Competitivness

One way in measuring the competition level is by the number of major competitors present in the market since they could affect the profit margin enjoyed by the firm (Kumar, Stam andJoachimsthaler, 1994). If a service firm faces high volatility in the competitive nature they are less likely to commit to that market since it could result in decreased profitability (O’Farrell and Wood, 1994). Geographical similarity creates opportunities to observe the competitors and these observations create pressure in the industry forcing companies to improve their business to stay competitive (Porter, 1990).

The companies that manage to stay competitive could enhance their reputation in the industry (Chen and Hsieh, 2008).

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2.1.4 Potential customers

International competition is increasing within the service industry. Therefore the increasing competition is a driving factor in terms of companies being more customer-‐

oriented, despite what product they sell. Many firms cannot meet the customer needs and therefore to satisfy the customers is a priority that leads firms forming alliances with other firms (Chen and Hsieh, 2008). Internationalization could be a consequence of saturation in the domestic market and therefore firms internationalized in order to find new customers and new markets to enter to increase in profit. Foreign investors constantly seek new markets and new opportunities arise in the world as countries are lifting their restrictions on ownership to attract investors (Minifie and West, 1998).

2.2 Entry mode selection 2.2.1 Greenfield investments

To internationalize and integrate operations across countries, Greenfield investment theory prefer to establish operations by building new plants rather than acquiring them.

Firm uses Greenfield investments where production logistics are key success factor in their line of business. The advantage in Greenfield investment is that the firm can build its plants to fit their interest and take the opportunity to integrate the latest technology to increase the operational efficiency. On the other hand the disadvantage is the high investment costs and slow entry in new markets. (Hollensen, 2011 pp.394-‐399)

According to some researchers, a negative aspect with Greenfield investments is that it is more risky compared to acquisitions due to the time consuming period when the firm starts in the beginning of a learning curve in the host market. However, if the firm has a company specific advantage and financial resources that will make them strong enough to cover the additional transaction costs establishing operations in the foreign market the time period will not be as important. As newcomers firms will face some negative impacts on their entry since the firm suffers from both a liability of newness and liability of foreignness. (Gerogopoulos and Preusse, 2009). Other studies indicated that factors such as investments cost, market size and technology differences have an impact on the choice of entry mode. If the host market competition level is very high or very low or the

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host market firms have less developed technology the best-‐suited entry mode is Greenfield investment (Müller, 2007).

2.2.2 Acquisition

Acquisition provides access to already existing customer bases, brand names, distribution channels, management skills and local knowledge, which can result in a rapid market entry. Advantages in acquiring a firm are gaining quick access to, a qualified labor force, established reputation, contacts in the network and governments, existing management experience and distributions channels. The disadvantages in acquiring another firm are that it is too expensive and the organizational treats in communication and integration between the acquired firm and acquirer. (Hollensen, 2011 pp.394-‐399)

In the acquisition settings, long-‐term strategic thinking is essential in understanding whether it will create value or not. Future events may change the value of the firm and therefore the acquirer is required to think about future scenarios. (Mcdonnald, Westphal and Graebner, 2008). Furthermore the companies need to be aware that when acquiring a firm means coordinating all the subunits since the acquired firm has it’s own culture, structure, processes and systems. This requires financial control, strategic control, as well as rich information exchange between the acquired firm and the acquirer. (Schijven and Barkema, 2008)

In cross-‐border acquisitions the firm has the advantage to combine the acquired firms advantages with its own specific advantages. Furthermore the acquirer might also be able to, in quicker fashion, react to changing market conditions in their market entry. By combining these synergies both parties will be able to overcome the transaction cost barrier on the local market and improve its position. (Gerogopoulos and Preusse, 2009) 2.2.3 Franchising

The concept of franchise is that a franchisor gives the legal right to a franchisee and in return the franchisor will receive payment against the usage of the business concept or systems including trademark and loyalty (Hollensen, 2011 pp.361, 376). Another

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researcher explains franchise format being an independent businessperson that obtains a mode to distribute goods and services by a parent company. This mode includes the rights to market services and goods using parent companies brand name and the parent company will in return get an up-‐front fee and ongoing royalties. (Barthelemy, 2008) Hollensen argues that there are mainly two factors that have contributed to the growth of the concept franchise. First, the replacement and decline of the traditional manufacturing industry into service-‐sector. And second, the government polices which makes it easier to start small businesses and for people to be self-‐employed. (Hollensen, 2011 pp.361, 376)

2.2.4 Joint venture

Joint venture means that the parties combine their resources with intention to create value. These resources include financial resources, technical knowledge, production knowledge, distribution channels, customer characteristics and knowledge relating to institutions and culture. The advantage is that in joint ventures the partners combine their knowledge whereas in acquisition and the internal development, gaining knowledge is extremely costly and becomes time consuming. (Kumar 2010) The reasons why a corporation uses joint venture are first, the possibilities to enhance their technology and managerial skills, which could lead to new opportunities in existing segments. Second, to increase the speed in entering a new market. Third, due to the government restriction in developing countries such as China the enterprises must respect the foreign policies. And fourth, to minimize expenditures and costs since the research development and global operations is expensive. (Hollensen, 2011 pp.366-‐376)

Further studies have been carried out on the horizontal and non-‐horizontal dimensions off joint ventures. Horizontal joint venture addresses the corporation of two competing enterprises in the same industry while the non-‐horizontal joint venture refers to two enterprises from different industries. The research indicated that horizontal joint venture is anticompetitive since the two linked enterprises increase of market power derived from two parent companies. On the other hand the non-‐horizontal joint venture is more likely to increase competition in the new market. (Tong and Reuer, 2010).

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3 METHODOLOGY 3.1 Research method

Before outlining the chosen research method for this thesis, it is important to mention that the idea for this thesis appeared during an internship at Radar Group, involving one of the authors in fall 2010. During this internship some empirical data was collected about Radar Group through informal meeting and Radar Group also provided the authors with information which made this study somewhat participative study. After the internship, further empirical data was collected through in-‐depth interviews to supplement the study.

A qualitative research method was chosen in collecting the empirical data in this study.

The qualitative method describes different situations, which is observed and interpreted to understand (Bryman and Bell, 2007:28). Through these understandings, new observations and interpretations can take place, which will lead to development in new situations (Hartman, 2004:273). As we aim to investigate the Nordic IT markets and its potentials for Radar Group’s services and what entry mode strategy the company should use for successful market entry this method was useful to create a better understanding in our investigation rather then measuring it. To maximize the outcome we interviewed three companies based in Sweden about their expansion in the Nordic market and how they incorporated their entry mode strategies. According to Davidson and Patel (2003:14) using research method is driven by how the research question is formulated.

The characteristics of our interview questions were open, to enhance and give the interviewees the opportunity to clarify and extend their answers.

This thesis is based on a case study and this strategy was selected as it allows us to compare Radar Group situation with three other IT consulting companies that were based in Sweden before their expansion to the Nordic markets. Furthermore, a case study and in-‐ depth analysis will allow us to understand why and how these companies chose to expand their business activates and more information can be presented in comparison to an overall case study.

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Throughout this thesis an appropriate literature and factors that can affect expansion of corporate activities and the choice of entry mode strategy were found, such as market legislation, export strategies, language skills and distance. The factors that are treated in this thesis are market selection factors, such as market size, economic growth, competition and potential customers. Further factors covers different entry mode strategies, such as green field investments, acquisition, franchise and joint venture.

After the theories were selected, the following steps was to find companies being related to the case study that have used the factors in selecting market and entry mode strategy.

This will be further explained under the section of respondents.

3.2 Respondents and the chosen organization

The Nordic markets are the leading regions when it comes to IT use in the businesses, in the government sector and among the general public. On IT the Nordic Region outperforms the other OECD regions and are among the top 5. Indicators further show that Nordic citizens are among the world’s most active users of the Internet. (Nordic Innovation Monitor, 2009)

Radar group is a small-‐sized company with 8 employees and has a turnover of €990.000 a year and operates as intelligence information delivery firm in the ICT market in Sweden. The company was established 2006 as an Informational Technology (IT) insight delivery consulting company in the Nordic region. To learn more about Radar Group’s products and services, see appendix 1.

Radar Group generate value in providing insight and advise for the competitiveness of the IT distributor (sell side) and models and advise in increasing value for the IT decision makers (buy side). Through their industry system platform Radar Group provides insight by syndicating reports, models and act as a strategic advisors to technological suppliers, decision makers and institutional investors in the entire ICT industry (Hans Werner, CEO, Radar Group).

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According to Radar Group CEO Hans Werner, Radar Group will within two/three year’s period expand their activities in the Nordic region. Illustrating his awareness of the financial weakness and low numbers of employees, Hans mentions that Radar Group’s customers are increasing and it will reflect in higher turnover, therefore Hans believe that they should offer more services covering the entire Nordic market not only the Swedish market. Hans further states that Radar Group will be financially stronger and increase the company’s number of employees considerably in the coming two to three years as result of gaining markets share. For further competition in the Swedish IT market, Radar Group announced September 13^th on 2010 a joint venture with Avega Group (www.radargroup.se). Radar Group forming alliances with Avega Group will not only offer consultancy and intelligence but also products that will give the customers technological systems and products based on the consultancy and the intelligence they are offered, says Hans. Since one of the authors worked in Radar Group, it was easy to collect data and information about Radar Group’s current situation and future plans to supplement the study. Therefore, it was interesting to examine how Radar Group business concept relates to the respondents business concepts. This study is limited to only one company’s intention to expand their activities and in order to minimize the risk of irrelevant information to analyze the theory and the empirical were constantly revised.

The choice of respondents was based upon three criteria’s:

1) The respondents must be in the ICT industry proving consulting services and products to their customers.

2) The respondents have business activities in at least one other Nordic markets besides the Swedish market. This is to increase the reliability of the respondents, as they will give information according to their expansion.

3) The respondents must be in the management team to make sure the relevant information is provided in order to connect to the theory.

To collect the empirical information and data the following respondents were interviewed:

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Lars Backhans, CEO Esri, Sweden.

Jan-‐Eric Ramberg, Easit AB, One of the head owners and also chairman in the board of directors.

Andreas Hedskog, 4C Strategies, founder and owner of the company.

All respondents have multiple years of experience in working in the IT industry. They hold senior management positions within their companies and therefore have an operational responsibility for the company’s development within the IT industry. The respondents did not want to be anonymous in this study and was confortable that they will provide honest answers.

It is our opinion that even though the interviewees have nothing to do with Radar Group in a direct manner, they offer experience from IT companies in almost identical situation as to that of Radar Group. All three interviewed companies were small IT consulting companies in the Swedish IT industry that internationalized to a Nordic market.

Therefore, we believe that the answers given by the interviewees offer a foundation to generalize from and draw conclusion for a company in Radar Group’s situation.

3.3 Oprationalization

The theoretical framework is the fundamental perception for the empirical data collection. The interview questions were not customized nor changed toward the interviewees. Questions about the companies market selection and company’s entry mode strategies were posed. According to the market selection factors, questions about what made the company enter a new market concerning market size, economic growth, competition or potential customers was posed. The entry mode strategies factor, questions about what made them invest in the specific entry mode such as greenfield investments, acquisitions, franchise or joint venture was posed.

Well established theoretical framework was use to increase the reliability of this study and it further proves that elder theoretical framework still are applicable. The market

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selection and entry mode strategies theories from the articles and books were used as instruments to sustain the required data. To learn more about the respondents market selection abilities, questions about what market they invested in and why were asked.

To distinguish the respondent’s perception and knowledge of entry modes, questions about how they entered the market were asked.

These two factors, market selection and entry mode selection will create an understanding of what affects and grows the commitment toward investing in a new market. The respondent’s market awareness was investigated by asking questions about the Nordic IT industry and its future development. For further information regarding how the respondents and the factors were operationalized, see Appendix 2.

3.4 Data collection

The contact with Radar Group’s CEO, Hans Werner was already established during the time of the internship. The interviews were conducted in a meeting with the respondents where the respondents had the possibility to decide the time and date. In preparing for data collection the purpose of the study and the character of the two major factors, market selection and entry mode was presented in order to form trust to the interviewee.

In addition to the interviews we found useful data sources in the official co-‐operation in the Nordic region, (www.norden.org) and organization for economic co-‐operation and development (www.oecd.org). Both these databases provided us with the latest reports and statistical data of the Nordic ICT market as well as the European ICT markets. In addition to these data we found relevant IT industry information in the research database, business source premier. As we search in business source premier we had to limit our research to industry (ICT) to avoid our search to be too broad. Which resulted in an industry profile report conducted by (www.Datamonitor.com). Furthermore, Radar Group provided us with information from their subscription at DataDia (www.Datadia.se), a company that collects and sells business information in the Nordic region. In collecting the data in qualitative research method, the data could consist of

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case studies, interviews, observations or analyzing written document and different data (Olsson and Sörensen, 2007:79).

3.4.1 The interviews

The interview collection for this study was based on personal interview conducted during face-‐to-‐face meeting with the respondents. Through interview the interviewee’s attitude and opinion was gathered. The direct contact between the researcher and the interviewee enhanced the validity of the data collection as the researcher can correct the answers during the interview. The interview lasted around 30-‐40 minutes and the answers were directly summarized to re-‐ensure that the answers were correct.

Interviews can be in structured or unstructured modes. Where the structured approach the interviewee are given very specific questioning while in the unstructured interview approach the interviewer has a list of topics that should be covered (Bryman and Bell, 2007:210-‐213). Based on this we had a list of topics when covering the way Radar Group current situation and future plans while on the other hand with Esri, Sweden, Easit AB and 4C Strategies we had some specific questions. After the interview the researchers transcribed the entire interview that the interviewee received to fill in if missing data or change if they were wrongly quoted. This as the researchers of this study is aware of the influence one has on the papers/notes.

When the interviews began, different question about the interviewee and their positions in the company were asked. The collected empirical data enable a comparison between the respondent’s business concepts and how they view different markets as well as entry mode strategies. The interview was divided into two part, one, the market selection and two, the entry mode choice.

3.4.2 Reliablity and Validity

The co-‐operation in the Nordic region (Norden) was established 1952, and the organization for economic co-‐operation and development (OECD) was formed 1961 and has been conducting data since. Data from the co-‐operation in the Nordic region (www.norden.org) is conducted together with the national statistical institutes (NSI) a law regulated process. The aim is to keep the production of the statistics on a comparable level for all of the Nordic nations even though the collection of the data

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occurs on national basis. The information provided by the organization for economic co-‐

operation and development (www.oecd.org) was formed in co-‐operation between the 34 member countries, which includes the Nordic nations. The aim with science, technology and industry outlook 2010 is to examine trends, prospects and policies across industries in the member nations. This includes collecting the latest data in budget planning, innovation expenditures, social and environmental issues as well as the conventions guidelines agreed by it members. Datamonitor is a company that since 1989 operates in the business intelligence industry. The industry profile report by Datamonitor that we came across was conducted in using 250.000 qualitative in-‐house interviews and consumer interviews. Further the report used national/government statistics, official international sources, international trade associations, broker and analyst’s reports, business information databases and company annual reports. Datadia is a company that delivers business information and have been established 1985. The information form Datadia was provided to us by Radar Group. The data collected by Datadia in collaboration with Swedman. When conducting research, according to (Davidson and Patel, 2003:102), high reliability is needed in order to accomplish high validity. We argue that judging from these institutions and organizations experience in conducting the same research or data on year-‐to-‐year basis increases their reliability.

Regarding the validity, the posed questions (see appendix 2) are supposed to measure our respondent’s market selection and entry mode choice. To ensure that our interviews give us relevant data that are inline with our purpose the following questions were asked. First, the general question enlightened our respondent’s managerial positions. Second, the questions concerning the market selection stress the factors that our respondents found as important in order to analyze which market to expand to when internationalizing. Third, the entry mode question were posed to find out what entry mode they chose and why. We also wanted to se if it was the right choice for a company in their situation, hence Radar Group’s situation. Furthermore we wanted to find out what were the pros and cons with the different entry modes. We believe that the questions altogether gives a comprehensive picture of companies that were in Radar Group’s situation analyzing market factors and entry mode for their expansion. This will

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Bryman and Bell (2007:423) shows the problem with generalizing when using a qualitative research method. We are well aware of the fact that the results of this thesis are not applicable on every company. However, as this thesis aim to provide Radar Group with information about the market potential in the Nordic markets and what entry mode is best suited for Radar Group, we do not intend for the thesis to be generalizing for the entire IT industry.

The fact that we only use a few sources could lead to biased information, as the respondents want to present the best in their business. Even though we are well aware of this fact, we remain confident that the respondents will give us accurate information and correct answers to our questions. The risk with biased or subjective answers is something that (Bryman and Bell, 2007:423) points out as a risk to be aware of. Further critique regarding the data collected from (www.norden.org), (www.oecd.org) and (www.Datamonitor.com) is that the data was not conducted for the purpose of this thesis. This is a problem we are aware off when collecting data or reading industry reports.

3.5 Limitations

The choice in conducting this study we have used both interviews and external sources and external reports, although it could implies a risk of biased information. The questions were formed from a theoretical perception except for the last question, which was an open question. The open question gave the respondents an opportunity to give opinions and information, this also allows the respondents to overestimate and give somewhat different reality to the answers.

We have, in this paper, limited our research concerning the cultural aspects such as nationality, customs, language and national legislations as this study is about markets that are similar in all the factors mentioned above. Other demarcation is that we limit our research about the Nordic markets to only include Denmark, Finland, and Norway even though Iceland is a part of the Nordic region. We have done this because Radar Group, Hans Werner, stated that the company has no intentions in investing in the ICT market of Iceland.